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Neutral Citation Number: [2014] EWHC 2002 (Comm)Case No: 2012 Folio 1093IN THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONCOMMERCIAL COURTRoyal Courts of Justice, Rolls BuildingFetter Lane, London, EC4A 1NLDate: 27 June 2014Before :MR JUSTICE EDER--------------------Between :THE FEDERAL MOGUL ASBESTOS PERSONALINJURY TRUSTClaimant- and (1) FEDERAL-MOGUL LTD(formerly T&N plc)(2) CURZON INSURANCE LTD(3) CENTRE REINSURANCE INTERNATIONALCOMPANY(4) MUENCHENER RUECKVERSICHERUNGSGESELLSCHAFT(5) EUROPEAN INTERNATIONALREINSURANCE COMPANY ---IAIN MILLIGAN QC and RICHARD FISHER (instructed by Hogan Lovells InternationalLLP) for the ClaimantPAUL STANLEY QC (instructed by Sidley Austin LLP) for the First DefendantPETER RATCLIFFE (instructed by CMS Cameron McKenna LLP) for the SecondDefendantCHRISTOPHER BUTCHER QC and JAWDAT KHURSHID (instructed by EdwardsWildman Palmer UK LLP) for the Third, Fourth and Fifth DefendantsHearing dates: 17-20, 24-26, 31 March, 1-3 April 2014---------------------Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of thisJudgment and that copies of this version as handed down may be treated as authentic.MR JUSTICE EDER

MR JUSTICE EDERApproved JudgmentFederal Mogul Trust v Federal Mogul & othersMr Justice Eder:I. Introduction1.The claimant in these proceedings is a Trust (the “Trust”) established incircumstances described more fully below by an order of the US Bankruptcy Court on8 November 2007 and in accordance with the terms of a Joint Plan of Re-Organisation(specifically the Fourth Joint Plan of Re-organization for Debtors and Debtors inPossession (as Modified)) (the “Plan”) and a Trust Agreement.2.Pursuant to the Plan, the Trust is, in effect, authorised to bring claims on behalf of avery large number of individuals in the US who have allegedly suffered injury as aresult of exposure to asbestos and asbestos related products supplied and/ordistributed over a lengthy period by the first defendant (“T&N”) and its subsidiaries(the “Asbestos Claims”). For convenience and unless otherwise stated, references toT&N in this Judgment include T&N’s subsidiaries.3.The second defendant (“Curzon”) was and is T&N’s captive insurer under the termsof an Asbestos Liability Policy (“ALP”). In summary, the ALP provided cover of 500 million in excess of 690 million with effect from 1 July 1996 against T&N’sliabilities for personal injury claims caused by asbestos anywhere in the world arisingfrom their activities prior to the policy inception date. In its turn, Curzon ceded itsliabilities under the ALP in equal shares to the 3rd, 4th and 5th Defendants (respectively“Centre Re”, an Irish subsidiary of Zurich Re, “Munich Re” and “EIRC”, a Barbadiansubsidiary of Swiss Re – collectively referred to as the “Reinsurers”) under aReinsurance Agreement (the “Reinsurance”) although, as referred to below, EIRC’sshare was subsequently reduced by virtue of a settlement made in the context ofseparate Court proceedings. The ALP and the Reinsurance are often referred to as the“Hercules Programme”.4.In very broad terms, the main issues concern the ability of the Trust to obtain certaindeclarations with regard to the obligations of the Reinsurers relating to the handlingand settlement of any Asbestos Claims which the Trust wishes to advance againstT&N. In essence, the Trust says that pursuant to the Plan, it has itself established anappropriate mechanism for valuing individual Asbestos Claims in accordance withwhat are called Trust Distribution Procedures (“TDPs”); that the TDP value ascribedto individual Asbestos Claims is considerably lower than the likely settlement oraward value for such claims if litigated in the US tort system, certainly if the costs ofdefending the claims are taken into account; that putting on one side any question oftime-bar, handling claims in such manner is an economic “no-brainer”; and that theonly businesslike approach is for the Reinsurers to settle them in accordance with anadministrative process reflected in the TDP standard i.e. without resort to the USlitigation process. On this basis, the Trust now seeks various declarations as set outbelow.5.On the main issues, both T&N (represented by Mr Stanley QC and his team) andCurzon (represented by Mr Ratcliffe and his team) are broadly neutral. The mainbattle lies between the Trust (represented by Mr Milligan QC and his team) and theReinsurers (represented by Mr Butcher QC and his team). In essence, on the mainissues, it is the Reinsurers’ case that the Trust has no standing to seek any declaratory

MR JUSTICE EDERApproved JudgmentFederal Mogul Trust v Federal Mogul & othersrelief; alternatively that such relief should be refused on various grounds. Inparticular, the Reinsurers say that there is no obligation on them to handle or to settlethe Asbestos Claims by reference simply to the value ascribed to them by the TDPs;that the Reinsurers will consider any such claims as may be presented by the Trust ingood faith; and that unless otherwise settled by agreement, any Asbestos Claimsshould, if necessary, be pursued by the Trust in the US tort system in the usual way.In response, the Trust says that although such an approach might, in the long run, leadto certain claims being defeated, it will do so at a price that will exceed the cost ofsettling such cases at TDP value.6.In addition, there are other ancillary issues in relation to which one or more of theparties seek declaratory relief as referred to below.II. Background7.T&N is an English company formerly known as T&N plc and originally Turner &Newall Ltd. For much of the 20th century, it was a major producer and distributor ofasbestos and products containing asbestos. In particular, together with two of itssubsidiaries, Gasket Holdings Inc (“Flexitallic”) and Ferodo America Inc (“Ferodo”),it used to distribute products containing asbestos in the United States. As is now wellknown, asbestos is (at least in certain forms) a serious potential danger to the health ofanyone who is exposed to it. In particular, exposure to asbestos can cause four maindiseases:i)Mesothelioma (predominantly a cancer of the lining of the lungs (pleuralmesothelioma); it is always fatal and is almost exclusively caused by exposureto asbestos. It is scientifically recognized as a signature asbestos disease);ii)Asbestos-related lung cancer (which is almost always fatal);iii)Asbestosis (a scarring of the lungs which is not always fatal but can be a verydebilitating disease, greatly affecting quality of life); andiv)Diffuse pleural thickening (a thickening of the membrane surrounding thelungs which can restrict lung expansion leading to breathlessness).8.Several factors can contribute to determine how asbestos exposure affects anindividual, including (i) dose (how much asbestos an individual was exposed to); (ii)duration (how long an individual was exposed); (iii) size, shape, and chemicalmakeup of the asbestos fibres; (iv) source of the exposure; and (v) individual riskfactors, such as smoking and pre-existing lung disease. In many cases, the symptomsonly appear many years after the original exposure.9.Asbestos litigation in the US began in the 1960s and thereafter exploded. Accordingto the American Academy of Actuaries, the management of this litigation by bothlitigants and courts in the US became an almost insoluble problem. Many companieswhich had manufactured, sold or distributed asbestos were faced with a large numberof claims which eventually resulted in them filing for bankruptcy. Over the last 40years or so, various possible solutions and part-solutions have been canvassed andimplemented (including the Wellington Agreement as considered, for example, inHiscox v Outhwaite (No 3) [1991] 2 Lloyd’s Rep 524); but these have generally

MR JUSTICE EDERApproved JudgmentFederal Mogul Trust v Federal Mogul & othersfoundered or been only partly successful for one reason or another. The result is thatthere remains a very large number of claimants who have allegedly suffered personalinjury as a result of exposure to asbestos many years ago and whose claims have evennow still not been resolved.10.By the mid-1990s, T&N’s principal business had moved away from asbestos and hadfocussed instead on engineering. However, it remained exposed to its legacy ofasbestos related claims. The nature and basis of such claims was explained in adetailed written statement of Paul J Hanly Jr who is a qualified US attorney andpartner in Hanly Conroy Bierstein Sheridan Fisher & Hayes LLP and (apart from abrief hiatus) acted as defence Counsel for T&N, Flexitallic and Ferodo from 1981until 2001. This statement was put in evidence by the Trust. By agreement, Mr Hanlydid not give oral evidence because none of the other parties wished to cross-examinehim. Based on Mr Hanly’s statement, the following would appear to beuncontroversial.11.During the 20th century, T&N ultimately became, and was for many decades, thelargest vertically-integrated asbestos company in the world being involved in everyaspect of asbestos, from the mining and milling of the mineral (at its mines and millsin southern Africa and Canada), through the manufacturing processes (at its factoriesin England, India, Africa, North America and Western Europe), to the sale,distribution and installation of its asbestos-containing products (through its sales,distribution and installation companies throughout the world). Every one of the T&Ncompanies, both in the U.K. and abroad, manufactured products using all of theasbestos fibre types - including crocidolite (blue asbestos), amosite (brown asbestos),and chrysotile (white asbestos).12.In the event, T&N found itself as a defendant in asbestos cases in both the US andother countries. The basic elements of the causes of action against T&N and itssubsidiaries were (i) failure to warn based on strict products liability and (ii)negligence. T&N was first named as a defendant in a US asbestos personal injury casein 1977. Thereafter, it was faced with a deluge of claims in the US arising principallyout of three areas of its historical business.13.First, the manufacture of a sprayed product known as “Limpet” (i.e. a cement andasbestos mixture sprayed directly onto surfaces for fireproofing, thermal insulation,acoustical insulation and correction, condensation control and decorative finishes).Limpet had the highest concentration of asbestos of any product produced anddistributed in the US, and contained amosite or crocidolite (the worst type ofasbestos). Claims were generally brought by persons involved in the team applyingthe Limpet, bystanders to the spraying process (such as painters or electricians) orpersons who were exposed to the clothes of someone involved in the process (i.e.family members or neighbours). Limpet was used extensively throughout the US on,for example, ships, submarines, in the manufacture of railway cars and locomotives,for thermal insulation and fireproofing in various industrial plants, and forfireproofing on public and private buildings.14.Second, ownership from 1934-1962 of a company called Keasbey & Mattison Co.(and, to a lesser extent, its ownership in other years of two Canadian subsidiaries).Keasbey was the head Limpet licensee in the US from 1934 to August 1962. LikeT&N, it was a vertically-integrated manufacturer and seller of asbestos-containing